A visit from the FBI two years ago prompted Dean Foods Co.’s former Chairman Tom C. Davis to hurl his cell phone into a nearby Dallas creek in an attempt to cover up an illegal stock-trading plot.

In a secret hearing in lower Manhattan on May 16, Davis, 67, described to a federal judge how he repeatedly tried to derail an insider-trading probe with the government closing in.

On Thursday, Davis and sports gambler William “Billy” Walters, a friend of Davis’s since the 1990s, were charged by the U.S. in a brazen insider-trading scheme, in which Davis allegedly provided tips to Walters in exchange for loans, business opportunities and investment capital. Armed with the information, Walters suggested to pro golfer Phil Mickelson that he bet on Dean Foods too. Mickelson, who isn’t accused of wrongdoing, has agreed to pay back almost $1 million he earned in profits from his trades.

According to a transcript of his plea hearing, which was made public late Thursday, Davis lied to FBI agents when they first visited his Dallas home on May 28, 2014. The investigators wanted to know whether Davis gave inside information to Walters. Throughout the federal probe, Davis would lie repeatedly to the U.S from 2014 to 2015, including perjuring himself before the SEC, he told the court.

“After the FBI visited my home, I knowingly destroyed the prepaid cellular phone that Billy Walters had previously provided me,” Davis told U.S. District Judge P. Kevin Castel in Manhattan. “I attempted to dispose of the cellular phone by throwing it into a creek near my home in Dallas,” he said.

Walters had given him the prepaid phone to use when passing on inside tips, Davis said, adding that he tossed it in the creek to thwart the FBI probe and destroy the evidence.

Plea Agreement

Davis, who pleaded guilty to 12 separate crimes, including conspiracy, securities fraud, wire fraud, perjury and obstruction, faces years in prison, according to a plea agreement which was also made public Thursday. He might get probation if the judge is convinced Davis help was valuable in Walters’s prosecution. That could mean a showdown in court with Davis testifying against his former buddy.

Davis’s attorney, Christopher Clark, said in an e-mail that his client “is pleased to be assisting in the investigation being conducted by the Department of Justice.”

As the chairman of a Fortune 500 company, Davis was a central figure in the insider scheme, according to Manhattan U.S. Attorney Preet Bharara. A Harvard MBA who worked for more than 20 years as an investment banker, Davis had accumulated mounting personal debts. He owed $178,000 to a private jet business venture and $100,000 to a Dallas charity he managed. Regulators said he used charity money to cover a casino debt.

Growing Debt

Davis racked up debt as he tried to maintain an executive lifestyle following his retirement. He repeatedly turned to Walters for help in covering his gambling debts as well as a $78,000 federal tax bill, according to a U.S. Securities and Exchange Commission complaint.

The men tried to avoid scrutiny by using the prepaid mobile phone and by speaking in code, referring to Dean Foods as the "Dallas Cowboys." Walters profited by about $43 million from Davis’s insider tips, Bharara said.

Davis told the judge he knew he was supposed to keep Dean Foods information confidential until the company released it publicly. But, he said he knew the tips would be valuable to Walters.

"I expected that I would receive personal benefits in the form of business opportunities and a potential source of capital from Billy Walters and his associates in exchange," Davis said.

Navy Officer

Davis, a former U.S. Navy officer, told Castel that after he began passing the tips, Walters arranged a $625,000 loan for him and later a $400,000 line of credit, neither of which Davis ever fully repaid. True to their secret bargain, Walters never attempted to collect “even a penny,” the SEC said.

Instead, prosecutors said, Davis provided Walters with constant updates about a 2012 Dean Foods spinoff that the gambler used to turn a $17.1 million profit by trading on the information.

"Did you know what you were doing was wrong and unlawful?" Castel asked Davis.